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2. The co-operative system amongst a highly illiterate population can only do substantial good if it is guided by a person, official or non-official, who has been fully trained in the principles and practice of Co-operation, and has studied them in other countries. This Government will, I think, prefer to train one of its own officers. In this case he should receive approximately six months training by means of a visit to (say) England, Belgium, Italy, Yugo Slavia, Palestine, certain parts of India, Ceylon, Malaya, Japan and certain parts of China. I believe that this can be done during six months. Denmark and similar advanced countries should be avoided since their lessons are not relevant to such a territory as Hong Kong. If it should be decided to encourage a non-official European worker instead of or in addition to a Cadet, I recommend that this be done by a grant made to one or more non-official organizations under suitable leadership. The Agricultural Association in the New Territories might serve as the agent for the rural areas, but a new association will have to be created for Victoria and Kowloon. Under the Registrar of Co-operative Societies there will in any case be required a "co-operative organizer" at perhaps $50 per month, who will do the routine work for which the highly trained co-operative officer will not be needed. The duties of the Registrar will be (i) to carry out his functions under the co-operative law as described below; (ii) to assist in the organization and the subsequent education of the members of the societies. It should be borne in mind that Co-operation is not philanthropic, i.e. the members must be continuously taught by the Registrar and the non-official organiza- tions which are promoting the movement to do as much as possible for themselves, and to learn as quickly as possible to stand on their own feet. (iii) A system of finance must be arranged for the societies, especially in the rural areas and especially in the earliest years. As indicated above, the members should be taught to do as much as possible for themselves. They should for perhaps ten years pay up small annual instalments of share money, and also make small monthly savings in their own societies. At the end of ten years the majority of societies ought to be in- dependent of outside help. In the meantime, I recommend that a certain sum, e.g. $5,000 be placed at the disposal of a semi-official Co-operative Loan Board. The members might be the Colonial Treasurer, the Registrar and two non-officials chosen from the rural and urban bodies which are promoting the movement. This Board would make advances, usually on the recommendation of the Registrar, to all rural societies with the conduct of which the Registrar was satisfied, and also in exceptional cases to urban societies; but, for the most part, urban societies should be expected either to build up their own capital or to obtain it on commercial terms from a com- mercial bank. It may be hoped that after a few years the rural societies also will be able, as in China, to obtain loans from the commercial banks instead of the Government, but this will perhaps not be practicable in the very beginning. (iv) A special ordinance covering the registration and working of co-operative societies should be passed. I have not been able to draft such an ordinance or the regulations for carrying it out during my short stay in the Colony, but I expect to be able to do so within one month and to submit it for the consideration of the Hong Kong Govern- ment. The principal duties of the Registrar under the Ordinance will be (i) to register as a society any group of persons whom he considers suitable for the purpose and to refuse to register, at his discretion, any group which he thinks unlikely to work in a co-operative manner. It is essential to leave him this discretion, and it is quite an ordinary proceeding under co-operative law. (ii) To audit or to cause a qualified person to audit every society once in each year. Urban societies may need to borrow the services of a bank accountant. The accounts of rural societies on the other hand will be very simple, and the Registrar or his Chinese organizer will be able to perform the task of this service. An audit fee can be charged in all cases, and should be paid not to the auditor but to an audit fund maintained by the Government (as a separate fund) for the payment of the Chinese organizer or for the payment of special fees to auditors of urban societies. This fund could also be entrusted to the